What is a “settlement class” settling if the case only exists to be extinguished?

The class lawsuit has become a ubiquitous fixture of the legal world in the past 40 years. When a stock falls, the class action lawyers sue on behalf of shareholders who wished they’d known the bad news sooner. When the experts determine that playing headphones too loud can hurt one’s hearing, the lawyers are there to claim that Apple failed to state the risk explicitly enough in its warning labels.

To the average consumer this is just background noise, a process that isn’t worth the time it takes to fill out the mailed forms that invite them to join in the inevitable settlement.

For Martin Redish, it’s a constitutional travesty. The longtime professor at Northwestern University School of Law, a self-professed liberal Democrat, has caused a stir in academic circles by suggesting that the class action as we know it violates the U.S. Constitution. His reasoning is simple: Since the right to sue belongs to the individual, only the individual can choose to give it away.

In a typical class action, lawyers sue on behalf of a group of plaintiffs who theoretically hold the same claim–purchasers of a stock that fell on bad news, say–and a judge approves combining them into a single group. In some cases plaintiffs can opt out of the class; in others the judge orders everybody in. Usually the majority of “plaintiffs” never even knew they were involved.

“You have injured people, but they’re basically comatose,” says Redish. “They don’t know about the class action, they don’t care, and they are unlikely to be compensated.”

This is an unpopular view with class action lawyers, who are very well compensated for putting these cases together. Securities class actions alone generated $3.1 billion in settlements last year, according to Cornerstone Research, with plaintiff lawyers probably collecting $600 million in fees.

These lawyers say the class action is an indispensable tool for disciplining corporations run amok. When the average consumer’s loss is too small to bother suing over, they say, the only solution is to assemble them into one big case.

“The class action mechanism is one of the most important tools available to the public,” says Stephen Garcia, a Long Beach, Calif. lawyer who frequently sues on behalf of consumers. “All the meaningful social alterations of the past 20 years have been accomplished through the class action or a similar legal procedure.”

Redish doesn’t disagree, but he says the process is illegitimate.

“These are individually held rights,” he says. “What a lot of class action scholars and proponents have done–quite cleverly, I must say–is engage in a sort of alchemy to transform individual rights into collective rights.”

Redish, 64, has a history of this sort of troublemaking. As a third-year student at Harvard Law School in 1970, Redish wrote an influential paper on the then controversial idea of extending First Amendment protection to corporate speech.

“At the time this was a joke,” Redish says. Not for long: The U.S. Supreme Court affirmed the doctrine in 1976 by overturning, on free-speech grounds, a state law forbidding pharmacists to advertise their prices. Since then social liberals have bemoaned the inability to control corporate speech, which, for instance, allows business groups to buy television ads opposing health care reform.

“It’s rare when somebody’s politics can be so completely divorced from his scholarly work,” says Stephen Presser, a conservative colleague at Northwestern who has known Redish for 33 years. He jokingly urges Redish to “man up and just become a Republican.”

Redish got interested in class suits after serving as a consultant for defendants in a number of cases in the 1990s (he is also senior counsel at the Chicago law firm Sidley Austin, notable as the place where the Obamas met). An expert on federal civil procedure, he edits a hornbook on the subject and is one of the legal scholars most often cited by federal judges.

“I saw class actions up close, and I saw there were some pathologies involved in the process,” Redish says. For example, plaintiff attorneys frequently claim to represent a class of people that exists mostly in their own imagination, “cardboard cutouts” who will never appear in court or even know their rights have been invoked. Redish calls the resulting lawsuits “faux class actions,” since they seem to be based on a valid claim but lack one crucial ingredient: an injured party. With no one to hold the lawyers accountable, they can settle these cases for trivial amounts per plaintiff, while raking in millions of dollars in cash as their fee. Attorneys general in California and 25 other states have sued to block a settlement that would give owners of Honda hybrids coupons to purchase less popular Honda cars and a dvd on fuel economy to settle claims they were misled about mileage. Lawyers would get $3 million in cash.

More problematic are “settlement class actions,” where lawyers for the plaintiffs and defendant agree beforehand to settle the case–as long as the judge approves a class that ropes in all the potential plaintiffs. Redish argues these are flat-out unconstitutional because there is no “case or controversy,” a constitutional requirement for making a federal case out of something. Since the lawyers are all on the same side, he says, the only losers are plaintiffs who are forever barred from suing over the matter again. The Honda case was settled before the class was certified, for example, and would prohibit class members from participating in subsequent regulatory proceedings.

Redish sees similar constitutional difficulties with so-called cy pres (pronounced “see pray”) awards, where judges accept the fact that nobody is going to spend 20 minutes filling out a form to receive a $2 settlement check and award the money to a charity instead. Some argue this doctrine has a noble lineage going back to Norman times (the term is Old French for “as near as possible”). But Redish traces its use in class actions to a student article in the University of Chicago Law Review in 1972, which gave lawyers and judges the idea for how to dispose of money nobody would claim.

Cy pres awards are troubling because they raise the specter of favoritism. Is the judge approving payment to the Red Cross because it’s the right thing to do, or because it’s the pet charity of the admissions director at a school he wants his kids to attend? They also bring a party into the litigation that doesn’t belong there. “The law doesn’t say anything about the charity,” Redish says. “The charity hasn’t been injured.”

None of this came out of the democratic process. Class actions were pulled out of the ether by an unelected board of legal experts appointed by the equally unelected chief justice of the Supreme Court. Under a 1934 federal law the experts created and revised the Federal Rules of Civil Procedure, including Rule 23, covering class actions. In 1966 Harvard professor Benjamin Kaplan pushed through a controversial change that allowed judges to approve the aggregation of individual claims into a single case, where previously such groups had to have a legal relationship such as partnership.

Redish doesn’t disagree with the idea of class actions, he just thinks the process must be approved by legislators who are answerable to voters. It’s a cop-out, he says, to justify class actions as the solution to special-interest politics and a clunky legal system.

“If individual compensation doesn’t work, then it’s up to the democratic process to come up with an alternative,” Redish says. When critics say class actions are necessary because regulations and traditional tort law won’t do the job, he adds, “the argument they are making effectively concedes the point.”